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For classic brick & mortar retail companies there has not been lack of warning about the growth of e-commerce in the last 15 years. The actual impact has been slower to materialise, but turns out to be more dramatic than expected. At first, only books and consumer electronics seemed to be affected. Now, in one category after another, new successful competitors are taking off, including shoes, apparel and even groceries. Whilst e-commerce advances, the next wave of innovation such as mobile shopping arrives, with Tesco and Ahold launching QR-based shopping channels.
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GfM Research Series: Successful Marketing in a Digital WorldChristoph Spengler
How can we control and target our marketing
during the digital transformation based on a firm
foundation for planning and decision-making?
Traditional methods and measurement tools run up
against their limits when trying to create a comprehensive
picture of customer behavior in a multichannel
world. At most they only show a small slice
of reality – and they are unable to capture very much
of new developments. Questions like: “What touchpoints
do customers really use?” and “How important
are these?”, remain unanswered.
Measurable and comparable touchpoint
management helps managers maintain an
overview and take decisions faster.
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With the increasing sophistication and empowerment of customers, this trend is driving the need for organizations to use new channels in new ways. However, many organizations have not been successful, experiencing disappointing results due to mismanagement of a new channel or misjudgement of overall channel requirements. This mismanagement can detrimentally affect company results.
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- What SAS is doing to make this a reality
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changed consumer behaviour. Today,
large numbers of consumers are
members of social sites, and they are
spending increasing amounts of time
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Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
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Effective Marketing To Maximise Customer Lifetime Value
1. An Acxiom White Paper
Effective Marketing to
Maximise Customer Lifetime Value
Acxiom UK June 2008
In conjuction with
2. Table of Contents
1 Executive Summary
3 Introduction/Context
5 Key Drivers of Lifetime Value
7 Efficient Marketing Spend
8 A Multi-Channel Marketing Strategy
10 Solution: Understanding the Customer
15 Summary and Conclusions
Table of Figures
3 Figure 1: Marketing Effectiveness Dichotomy
4 Figure 2: Trends in Customer Spending Loyalty
5 Figure 3: Customer Lifecycle: Matching marketing
initiatives to the phases
6 Figure 4: Examples of Effective Marketing Approaches
7 Figure 5: Customer Lifetime Value: How value is dependent
on the acquisition costs and churn rates and ARPU
8 Figure 6: Multiple Marketing Channels
8 Figure 7: Customer Lifecycle: Matching marketing
initiatives to the LifestagesC
9 Figure 8: Customer Lifecycle: Matching marketing initiatives
to the individuals position on customer lifecycle
11 Figure 9: Technology Platform and Best Practices
14 Figure 10: Marketing Learning Cycle
3. Acxiom | White Paper
Competition in the telecoms industry is building daily,
putting excessive pressure on marketing departments
to entice, maintain, and up-sell customers. The savvy
consumer market is driving price wars and diminishing
the effectiveness of existing promotional techniques.
Couple this with a change in the consumers attitude to
receiving marketing communication, now the time is ripe
to reconsider the fundamental premise on which
marketing strategies are based.
In this paper, we promote a marketing approach which tailors campaigns to three stages of the
telecoms customer lifecycle: acquisition, retention, growth. At the heart of these three stages lie
three corresponding economic drivers – acquisition costs, retention costs and Average Revenue
Per User (ARPU). We demonstrate how a slight manipulation in the drivers has a significant
impact on the economic value.
1
4. Acxiom | White Paper
Telco marketers are faced with a vast range of channels spawning from new digital media,
viral effects, and elaborate loyalty schemes, along with more traditional print and ‘above the
line’ media techniques. Our experience shows that consumers are treating a wider variety of
marketing communications as information collateral resulting in the creation of a significant
gap between the measurement of contribution and the overall effectiveness of their marketing
communications. The new marketing challenge is to manage the effective mix of concurrent
marketing touchpoints such that the consumer chooses to ‘push’ towards an organisation.
Electronic communication is giving customers a new kind of power over the telecom giants.
They are able to search, compare and select from an abundant source of data at lightning
speeds. This ‘Google-will-find-it’ mentality and viral
communication trends has led to a need to focus efforts
more on customer initiated, ‘pull’ marketing practices.
We urge Telcos to balance efforts from ‘push’ techniques A Marketing Opportunity
Telcos generate a huge
in favour of customer driven approaches as these are
amount of personal
significantly more cost effective, more targeted and more customer information:
measurable. Pull based marketing empowers customers effectively harnessing
this will ensure more
and rewards marketers for being relevant. A successful targeted campaigns
marketing organisation finds the correct balance between across multiple
marketing channels
‘push’ and ‘pull’ marketing practices.
Alongside banking, the Telecoms industry has access to
one of the richest sources of personal data on customers.
By adopting an optimal multi-channel strategy with the right
tools, proactive operators can turn these sources into
a marketing opportunity. Understand customer life stages
Approach
Focus on key economic drivers
This approach necessitates significantly improved customer
understanding than is typically the case. Gathering, analysing
and applying this information thus becomes a vital starting point
Match campaigns to life stages
for an effective marketing strategy. The solution requires both a
series of internal initiatives to achieve best practices and a
technical platform (intelligent database and customer data
integration software), which we describe in Section 5. Develop process to implement
customer database solution
2
5. Acxiom | White Paper
Introduction/Context
The UK telecoms industry has been driven by mergers and Marketing Challenges
acquisitions, product launches, technological advancements, • M&A
regulatory requirements, aggressive marketing and fierce • New products
competition, with non-traditional competitors emerging and • Technology advances
new business models forming. Looking forward, we predict • Regulation
further pains being caused by disruptive (i.e. free) IP-based • IP communication
communcation models; customers are increasingly expecting
• Bucket plans
huge bucket plans, and subscribers to converged players
Strong Competition
such as Sky and Virgin Media expect heavily discounted line
rental for multiple subscriptions.
Telcos fight for market share by increasing subsidies, channel commissions and brand
campaigns. The majority of marketing investment is focused on the acquisition stage,
despite higher yields realised during retention and growth, where a customer’s ARPU can
be maximised. This forms a sharp dichotomy between effort put in and value gained, reflecting
an ineffective marketing strategy. Now that most markets are reaching saturation, it is time
to re-balance the marketing effort to retain customers and grow revenues through increased
usage and value added services. In this way the marketing effort will better reflect the customer
value curve.
Figure 1: Marketing Effectiveness Dichotomy
High
Customer
Profitability
Re-addressing the marketing
effectiveness across the
customer lifecycle
Marketing
Effort
Low
Acquire Retain Grow
Customer Lifecycle
3
6. Acxiom | White Paper
The need to redress the balance between acquisition, retention and ARPU is driven
by the increasing gap between churn and ARPU, as shown in Figure 2 below.
Figure 2: Trends in Customer Spending & Loyalty1
32 40%
35% Drivers of falling ARPU:
30
Average ARPU (Euros)
30%
• Competition
28 Increasing gap • Regulation (e.g. roaming)
25%
• New IP technologies
26 20%
Drivers of churn:
15%
24 • Creation of MVNOs
ARPU: monthly average UK mobile (Euros) 10% • Equalising of market share
Churn: annual average UK mobile
22
5% • Number portability
20 0% • No brand loyalty
4
4
5
5
6
6
7
10
30
10
30
10
30
10
Q
Q
Q
Q
Q
Q
Q
Despite these factors affecting the industry, Telcos have been slow to develop their
customer insight strategy in line with their counterparts in financial services and retail.
Banks and supermarket chains have shown with great success how adopting a customer-
centric approach and understanding key drivers behind buying behaviour can increase the
effectiveness of marketing campaigns and stimulate greater loyalty.
1
Analysys Mason Group
4
7. Acxiom | White Paper
Understand customer life stages
Key Drivers of Lifetime Value
In the face of the market challenges, effective marketing can be
achieved through re-evaluation of the approach taken to the three Focus on key economic drivers
core areas of the customer lifecycle: acquisition, retention and
growth. The key to success lies in pinpointing and manipulating
the key drivers of these phases: acquisition costs, churn and Match campaigns to life stages
average revenue per user (ARPU).
Develop process to implement
customer database solution
In the diagram below, we show how the key drivers of lifetime value
correspond to the stages of the customer lifecycle.
Figure 3: Customer Lifecycle:
Matching marketing initiatives to the phases2
CUSTOMER LIFECYCLE
Acquisition / VAS / Additional /
Brand Tariff Device
Awareness Winback Content / Multi-play
Upgrade Upgrade
Bundle Service
Phase 1 Phase 2 Phase 3
DRIVERS Acquisition Churn APRU
Costs
Analysys Mason Group
2
5
8. Acxiom | White Paper
1. Acquire: Grow market share through
customer acquisitions SAC:
Subscriber Acquisition
2. Retain: Reduce churn through upgrades Costs; total marketing
and loyalty schemes spend divided by gross
subscriber additions over
3. Grow: Increase revenue (ARPU) from core
a given time period
and add-on services
Churn:
We encourage Telcos to migrate from a traditional approach Customer turnover;
proportion of subscribers
to a fresh marketing model by ensuring efficient marketing leaving an operator during
spend and producing better targeted campaigns. Below are a given time period
some examples:
Figure 4: Examples of Effective
Marketing Approaches
Phase Driver Traditional Approach Effective Marketing Approach
Mass market land grab for Competitive pricing structures,
1. Acquire SAC market share for single e.g. bucket pricing plans Targeting
communication service niche segments
Activities to prevent churn to Address churn to substitute services,
2. Retain Churn similar competitors (fixed to e.g. VoIP, instant message, fixed
fixed, mobile to mobile) mobile substitution
Up sell new value added, entertainment
3. Grow ARPU Focus on voice and text and data services. Multi play converged
approach, adding new core services
6
9. Acxiom | White Paper
Understand customer life stages
Efficient Marketing Spend
Allocation of marketing budgets is a contentious and highly guarded
topic. As such any spend must be justified by solid economic analysis Focus on key economic drivers
and demonstrate physical returns on investment.
By targeting just one of the three drivers outlined above, the impact
Match campaigns to life stages
of an investment can be tracked and quantified, and customer value
optimised. The model below demonstrates how relatively minor
adjustments to retention activity can lead to a significant increase
in customer lifetime value. Develop process to implement
customer database solution
Figure 5: Customer Lifetime Value: How value is dependent
on the acquisition costs and churn rates and APRU
Standard Effective
Phase 3: Grow Revenue / Cost Marketing Marketing
Product marketing to ARPU €65 €70
stimulate revenue, Cost of Sale -€16 -€18 Increasing
volume discounts Gross Margin €49 €53 ARPU
Gross Margin % 75% 75%
Phase 2: Retain
Retention Costs -€5 -€6.5
Loyalty schemes, Operating Costs -€15 -€15
Lower churn
churn prediction win Net Margin (pre SAC*) €29 €31
back activities Net Margin % (pre SAC) % 44% 44%
Phase 1: Acquire
SAC (One off) -€300 -€300 Increased
Discount for bringing Upgrade Cost** -€300 -€500 acquisitions
own handset, recommend Payback on SAC (months) 10.4 9.7
a friend offer, effective
segmentation
Churn 25% 15%
Lifetime (Years) 4 6.7 Overall import:
Lifetime Value (pre SAC) €1,380 €2,480 Higher Lifetime
Lifetime Value (post SAC) €780 €1,680 Value
Return on Investment calculation Increased retention upgrade cost -€200
Total increased cost -€715
Increased lifetime value €897
Increment from Effective Marketing €182
Return on marketing investment 22%
In the effective marketing model, an additional retention upgrade and increased monthly
retention activity is implemented. These relatively small actions have a significant impact:
they increase the customer lifetime value over two-fold and give a high return on investment
(35%). Strikingly, the analysis demonstrates how sensivitive the lifetime value is to these drivers:
a 1% reduction in churn results in a 10% increase in lifetime value, whereas a 1% increase in
ARPU leads to a 3% increase in value.
Now that we have identified a focus for our campaigns, we can consider the channel options.
7
10. Acxiom | White Paper
Understand customer life stages
Focus on key economic drivers
A Multi-Channel Marketing Strategy
Within each of these three stages, marketers are faced with Match campaigns to life stages
a plethora of marketing channels, see Figure 6 below.
Develop process to implement
customer database solution
Figure 6: Multiple Marketing Channels
CHANNELS EXAMPLES
Customer Initiated Search engine inbound call centre, IVR, web browsing
PULL Community Marketing Message boards, blogs, podcasts, customer reviews
Viral Marketing Word of mouth, email, recommend a friend
Mass Media TV, radio, billboard, magazine/newspaper, internet
banner ads, sponsored links, production brochure,
PUSH press release/conference, sponsorship
Direct Media Message boards, blogs, podcasts, customer reviews
Loyalty Word of mouth, email, recommend a friend
The opportunity for Telcos to exploit these channels with effective marketing campaigns
is demonstrated by the examples outlined below in Figure 7.
Figure 7: Customer Lifecycle: Matching marketing
initiatives to the Lifestages
CHANNELS EXAMPLES
• A customer searching for a contract from Orange on the
Internet will be targeted with offers from Orange directly
and resellers such as Carphone Warehouse
PULL • Broadband comparison sites rate custoemrs service
experience providing relevant insights for potential customers
• Virgin Mobile’s “Fancy Free Airtime” scheme, rewarding
customers to recommend Virgin as their mobile operator
• O2’s music related sponsorship of the O2 Arena, events
staged at the venue and promotion of unsigned bands
• Mobile customers are sent ‘Vodafone paddport’ offers by
PUSH SMS when roaming
• T-Mobile’s ‘Flext’ campaign matches lifestyle branding
with a tariff
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11. Acxiom | White Paper
Given the sheer number of channel options, it has become impossible and counter-productive
to execute an all-encompassing campaign. As such the channel focus needs to reflect
customer preferences. An increasing proportion of sales are a result of customer-initiated
communications; marketing efforts need to reflect this trend.
Figure 8: Customer Lifecycle: Matching
marketing initiatives to the individuals
position on customer lifecycle
Phase 1 Phase 2 Phase 3
Acquisition / VAS / Additional /
Brand Tariff Device
Awareness Winback Content / Multi-play
Upgrade Upgrade
Bundle Service
PULL
Viral Marketing
Community Marketing
Customer Initiated
d d d
ren ren ren
PUSH al T al T al T
p tim p tim p tim
Loyalty O O O
Direct Media
Mass Media
We encourage marketers to migrate the channel mix from push media to customer initiated
pull techniques. Pull marketing matches the marketing message so closely to the needs of
the audience they do not see the marketing message as intrusive.
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12. Acxiom | White Paper
Understand customer life stages
Focus on key economic drivers
Solution: Understanding the Customer
Understanding the customer, their needs, preferences and unique Match campaigns to life stages
position in the lifecycle forms the basis of the effective marketing
strategy being proposed here.
Develop process to implement
customer database solution
Telcos can capture information on their customers from many sources, primarily:
• Demographics (market data)
• Usage history, communications preferences, location, presence (network monitoring)
• Purchase behaviour (billing systems)
• Direct interaction (via call centre and web)
• Campaign responses
It is essential to understand the customer’s purchasing journey and to capture information
about the customer touchpoints centrally to quantify the interplay and effectiveness of each
channel. Consumer browsing habits mean that an individual’s selection and purchase process
involves cross-fertilisation from a variety of channels.
Gathering, analysing and applying this information is crucial to being able to assess the
relevant value drivers for each individual customer or group of customers.
Despite this, manipulation of this data is often weak amongst telcos. Inadequate database and
integration systems and poor working practices, lead to a lack of customer understanding and
mistargeted campaigns, undermining the effectiveness of a campaign or entire strategy.
To address this issue, we illustrate a marketing toolkit, with a technical platform at the core,
supported by a series of critical success factors or best practices.
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13. Acxiom | White Paper
Best Practices
The critical success factors, or best practices, for a winning marketing strategy are outlined
below. These factors facilitate the implementation of a technical platform which consolidates
customer and campaign information from the multiple touch points outlined in Section 2.
Figure 9: Technology Platform
and Best Practices
1. Channel interplay
must ensure brand
consistency and avoid
product cannibalisation
8. React: the
marketing tool
selected must learn 2. Utilise purchasing
from the campaign behaviour to select
it supports marketing channel
1
8 2
7. Ensure there 3. Set up two-way
TECHNICAL
is a single view
of each customer 7 PLATFORM
Intelligent Database/
3 communication to
build a realationship
CDI Software with your customer
6 4
5 4. Take more care
over pull marketing -
6. Make customer
it is cheap and
data accessible at
BEST PRACTICES highly relevant to
all touch points
the customer
5. Orientate marketing
strategy according to
the stage in the
customer lifecycle
Channel interplay must ensure brand consistency
and avoid product cannibalisation
An optimal multi-channel marketing strategy must begin and end with effective interaction
between the various marketing channels and customers. Most importantly though, it needs
to be tailored such that the consumers preferences are catered for. This can only be done if
the data is centralised, accurate and available at all media touch points. Integrating customer
information requires an internal initiative to encourage interaction and joint-planning between
departments, as well as database sharing. Message consistency and relevence should be
considered alongside achieving equal and appropriate exposure of customers to campaigns.
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14. Acxiom | White Paper
Utilise purchasing behaviour to select marketing channel
Automated systems can indicate when a customer has been contacted, and how they have
reacted to this and whether it would be suitable to contact them again. This kind of intelligence
needs to be stored in a shared domain or central repository and drawn upon when choosing
an appropriate channel for each individual.
Set up two-way communication to build a relationship
with the customer
A recent survey demonstrated that 71% of people communicate with their service provider by
phone; 25% at retail outlets; 4% on web/email 3. Being aware of this preference will contribute
greatly to the effectiveness of a marketing campaign. Customer profiles should be referred to
at every stage in the campaign planning and management to achieve the optimal content and
channel mix. Feedback should be captured at each customer interaction point.
Take more care over pull marketing – it is cheap and
highly relevant to the customer
Customer-initiated pull marketing tells you what your customers are interested in, providing
instant profiling information. The key is to facilitate their research process in a way that brings
your product to the foreground and highlights its benefits. Pull marketing works most effectively
for an operator when the opportunity is taken to cross-sell or up-sell; for example the customer
profile can inform call centre staff which products the individual will be most susceptible to. This
therefore involves a mixture of software and training to ensure successful implementation.
Orientate marketing strategy according to the stage in the
customer’s lifecycle
The marketing communication strategy will depend on the position of the individual in their
customer lifecycle and the mix of previous marketing exposure. An intelligent database can
detect at which point in the lifecycle an individual is and recommend a channel mix accordingly.
Whilst being one of the most expensive marketing mediums, mass media is not always relevant
for the majority of stages in the customer lifecycle. On the other hand, pull marketing requires
far less capital investment, is highly relevant to the customer and applies to all stages in the
customer lifecycle.
3
Wireless Profit: Empowering Mobile Channels to Cross-sell and Up-sell, November 2006
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15. Acxiom | White Paper
Make customer data accessible at all touch points
In order to maximise the value of this information, it must be available in a comprehensible
form at all touch points (including field sales, call centre and retail outlets), to allow customer
recognition and ensure the utilisation of cross-sell and up-sell opportunities. Real-time
transactions can be recorded so as to give almost instantaneous feedback.
Ensure there is a single, up-to-date view of each customer
Telcos should develop a single customer view, taking full advantage of the myriad of
information available. Information must be gleaned from all customer touch points and can
also be complimented by third party demographics to ensure a holistic customer profile. Once
captured and enhanced, the data needs to be integrated across product, channel and segment
to create a single view of the customer. This single view should include customer usage data,
associated history, lifestyle and transactional data. Gartner claims that gaining a single view
could result in a revenue increase of 48%4.
React: the marketing tool selected must learn from
the campaign it supports
The outcome of the campaigns should be analysed and this information used to enhance
the customer profiles within the database. In this way a learning cycle can be built into the
marketing process. An automated Next Best Offers (NBO) solution allows the telco to
capture the purchasing moment/opportunity.
The best CRM solutions will allow the conducting of multiple, concurrent and highly targeted
campaigns based on real time triggers and retention campaigns based on current usage
behaviour and historic data. The value lies in following through on the initial campaign and
refining the customer profile.
Gartner: CRM Predictions Revisited (Jan 07)
4
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16. Acxiom | White Paper
This process is demonstrated by the marketing learning cycle:
Figure 10: Marketing Learning Cycle
The customer
data integration
tool learns Customer Data Integration
from the
marketing tool
MULTI CHANNEL MARKETING STEPS
New campaign
design learns
from the ROI of Design Select Gain Calculate
past campaigns Campaigns Channels Customers ROI
• Budgets • Stage in lifecycle • Target segments • Cost of CDI tool
CONSIDERATIONS • Capabilities • Channel interplay • Customer value • Cost of campaign
• ROI learnings • Brand objectives • Market share • Monitoring
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17. Acxiom | White Paper
Summary and Conclusions
To date, traditional marketing techniques stem from allocating a budget and deciding upon
the offer and medium before considering who might be receptive. It is clear that this trend
needs to be reversed by creating smarter marketing solutions embracing customer-initiated
techniques. This necessitates a step change in the way Telcos capture, manage and
prioritise customer data.
In this paper we have proposed best practices to implement an effective marketing solution,
which will result in true channel integration from a strategic, operational and technological
viewpoint. Once this has been accomplished, a suitable mix of channels can be chosen
depending on customer preferences and position in the lifecycle.
Customer data integration allows more than just an assessment of the effectiveness of a single
campaign (i.e. retrospective information); it facilitates all of the steps needed to implement an
effective marketing solution. A good return on investment is achieved through understanding
the key drivers in the customer lifecycle and matching campaigns to each phase of the
customer journey.
We have demonstrated how, by focusing on just three indicators, highly targeted campaigns
can have a significant impact on lifetime value. We recommend an effective marketing strategy
should incorporate the following strategic initiatives:
• Understand the customer’s position within the lifecycle
• Understand the value drivers within each phase
• Tailor campaigns to each phase
• Migrate efforts towards customer-initiated, pull marketing
• Capture data from all customer interaction points
• Implement a well managed, learning database solution,
providing a consistent single customer view
As each Telco will be targeting differing segments with customer bases at various stages
in the lifecycle, a diagnostic approach will help create a tailor made solution.
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18. Acxiom | White Paper
About Acxiom
At Acxiom, we make information intelligent. As the global leader in customer information
management, we transform data into actionable business insight – and we do it better than
anyone else. Our enterprise information solutions help the worlds largest and most successful
companies increase revenue, reduce cost, improve profit and lower risk. Working as a trusted
partner, Acxiom provides not only outstanding service and results today, but also proactive
ideas and innovative solutions to ensure our clients continue to succeed tomorrow. Powered
by superior data, technology, services and industry expertise, these multi-channel, client-centric
solutions enable better business and marketing decisions that enhance customer acquisition,
retention and value. Our lines of business include: Customer Data Integration (CDI), Data
Products, IT Services, Digital, Risk Mitigation, Direct Marketing and Consulting
16
19. For more information about Improved
marketing solutions visit our website
at www.acxiom.co.uk, email us at
telecoms@acxiom.com or call:
+44 (0)20 7526 5100